If it looks like TUPE is the reason, it probably is

A recent Employment Appeal Tribunal (‘EAT’) case serves as a useful reminder that an employer can only change terms and conditions of employment following a TUPE transfer in limited circumstances.

Background

The Transfer of Undertakings (Protection of Employment) Regulations 2006 (‘TUPE’) imposes additional restrictions on an employer’s ability to change the terms of employment of transferring employees’ rights where their employment transfers from one employer to another.

Any change to the terms of employment of a transferring employee, where the sole or principal reason for the change is the transfer, is void, even if the employee agrees to the change.

Under regulation 4(9) of TUPE, an employee is entitled to resign where the transfer involves a substantial change in their working conditions to their material detriment.

Changes to terms and conditions are allowed where the sole or principal reason for the variation is an economic, technical or organisational reason (‘ETO reason’) entailing changes in the workforce.  A change in the workforce must involve a change in the number, or possible functions, of the employees.

Lewis v Dow Silicones UK Limited

On 1 March 2017, Dow Silicones insourced its operations and maintenance within which the claimant was employed. This amounted to a service provision change for the purposes of TUPE.

Following the TUPE transfer, Dow Silicones sought to introduce changes to standby/call out arrangements and responsibility for issuing Safe Work Permits.  The claimant asserted that these changes would involve a substantial change in working conditions to his material detriment for the purposes of TUPE. He resigned and claimed that he was constructively dismissed and that his dismissal was automatically unfair.

An employment tribunal held that the claimant was not dismissed because Dow Silicones was entitled to introduce the changes and they did not constitute a substantial change in working conditions to his material detriment.

The claimant appealed. The Employment Appeal Tribunal substituted a decision that there was a substantial change to his material detriment and remitted the case.

A second tribunal held that the sole or principal reason for the changed terms was not the transfer but was to address pre-existing problems with health and safety, which was an ETO reason, and his dismissal was fair.

The claimant appealed to the EAT on the basis that: the second tribunal should have closely scrutinised any reason advance by Dow Silicones to the effect that the transfer was neither the reason nor principal reason for the change in working conditions; Dow Silicones had advanced a case that was not argued at the original hearing; and, there was no evidence to support the conclusion that the principal reason for the changes to working conditions was safety.

 The EAT noted that where a TUPE transfer involves a change in working conditions to the material detriment of the claimant and the transfer is the occasion for the change, it is hard to see how it could be held that the claimant has not at least set up a sufficient basis for a claim that the transfer was the reason or principal reason for the change.

It was for Dow Silicones to show what its reason was for dismissing the claimant. If the employer does not prove a reason that was not the transfer, it is open to an employment tribunal to decide that the sole or principal reason for the dismissal is one that was not advanced by either party, but there must be evidence as to what the employer had in mind when it required the change in working conditions.

The reason relating to health and safety found by the tribunal was not pleaded or evidenced by Dow Silicones and there was no other evidence that could support that having been the underlying reason in its mind at the time.

The EAT concluded that there was only one possible outcome, and substituted a decision that the claimant was unfairly dismissed because the sole or principal reason for dismissal was the TUPE transfer, and the ETO reason was not made out.

Comment

Unless the original employer is subject to ‘relevant insolvency proceedings,’ changes to terms and conditions following a TUPE transfer will be void unless:

• The sole or principal reason for the variation is an ETO reason entailing changes in the workforce, provided that the employer and employee agree that variation. This includes a change to the place where employees are employed.
• Terms of the employment contract permit the employer to make that variation, such as under a mobility clause.
• Terms are incorporated from a collective agreement, provided that the variation takes effect more than one year after the date of the transfer and the varied terms, when considered together, are no less favourable to the employee.

Employers are often surprised by the limitations on their ability to change employees’ terms and conditions following a TUPE transfer. If you are considering taking over a contract or business undertaking and you may wish to change the terms and conditions of employees who have transferred under TUPE, it’s sensible to seek legal advice prior to doing so.